{"id":251210,"date":"2021-05-17T01:05:00","date_gmt":"2021-05-16T22:05:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/heres-how-bitcoins-intraday-volatility-complicates-leverage-trading\/"},"modified":"2021-05-17T01:05:00","modified_gmt":"2021-05-16T22:05:00","slug":"heres-how-bitcoins-intraday-volatility-complicates-leverage-trading","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/heres-how-bitcoins-intraday-volatility-complicates-leverage-trading\/","title":{"rendered":"# Here&#8217;s how Bitcoin&#8217;s intraday volatility complicates leverage trading"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23e816e03a1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23e816e03a1\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-how-bitcoins-intraday-volatility-complicates-leverage-trading\/#The_basics_of_derivatives\" >The basics of derivatives<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-how-bitcoins-intraday-volatility-complicates-leverage-trading\/#Markets_with_very_low_volatility_are_perfect_for_leverage\" >Markets with very low volatility are perfect for leverage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/heres-how-bitcoins-intraday-volatility-complicates-leverage-trading\/#20x_leverage_seems_crazy_considering_Bitcoins_daily_moves\" >20x leverage seems crazy considering Bitcoin&#8217;s daily moves<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Here&#8217;s how Bitcoin&#8217;s intraday volatility complicates leverage trading  <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>The crypto sector is in a bull market, and frequent evidence comes from anonymous traders who post their five-, six- and seven-figure investment returns as screenshots on Crypto <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Twitter<\/a>.<\/p>\n<p>This condition creates a FOMO-like situation where everyone gets greedy. The temptation to boost potential earnings by twenty times or more is often irresistible for most novice traders. <\/p>\n<p>Today, almost every cryptocurrency exchange offers leveraged trading using derivatives. To enter these markets, a trader has to first deposit collateral (margin), which is usually a stablecoin or Bitcoin (BTC). However, unlike spot (regular) trading, the trader cannot withdraw from a futures market position until it has been closed.<\/p>\n<p>These instruments have benefits and can improve a trader&#8217;s outcomes. However, those who often rely on incorrect information when trading futures contracts end up with heavy losses rather than profits.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_basics_of_derivatives\"><\/span>The basics of derivatives<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>These leveraged futures contracts are synthetic, and it is even possible to short or place a bet on the downside. Leverage is the most <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ealing aspect of futures contracts, but it is worth noting that these instruments have long been used in stock markets, commodities, indexes, and foreign exchange (FX).<\/p>\n<p>In traditional finance, traders measure daily price change by calculating the average closing price changes. This measure is widely used in every asset class, and it&#8217;s called volatility. However, for various reasons, this metric isn&#8217;t helpful for cryptocurrencies and can harm leverage traders.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/6dae8fc0-6d47-4a94-8742-ae4a7eb1ba98.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin 60-day USD volatility. Source: BuyBitcoinWorldwide<\/em><\/figcaption><\/figure>\n<p>To be brief, the higher the volatility, the more often an asset price presents wild oscillations. Contrary to the expectation, moving up by 7% to 10% every day represents a low volatility indicator. This happens because the deviation from the mean is small, while random fluctuations between a negative 3% to a positive 3% present a much wider range.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Markets_with_very_low_volatility_are_perfect_for_leverage\"><\/span>Markets with very low volatility are perfect for leverage<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Knowing the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> range of how an asset oscillates is extremely important when opening leverage positions. Take the British Pound Sterling (GBP), for example, and one will notice that its volatility is usually below 1% as surprise aggressive daily price changes are unusual.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/a0083d58-6050-4603-a650-826eee734f8c.png\"><figcaption style=\"text-align: center;\"><em>GBP currency 60-day USD volatility. Source: BuyBitcoinWorldwide<\/em><\/figcaption><\/figure>\n<p>FX markets are relatively stable markets when compared with stocks and commodities. Therefore, some regulated brokers offer even 200x leverage, meaning a 0.5% move against the position would cause a forced liquidation.<\/p>\n<p>For a cryptocurrency trader, the Swiss Franc&#8217;s (CHF) daily change versus the U.S. dollar would likely be seen as a stablecoin.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/ab630997-8dc6-4d65-b5d9-18eef7a0aef1.png\"><figcaption style=\"text-align: center;\"><em>Swiss Franc (CHF) USD prices. Source: Investing.com<\/em><\/figcaption><\/figure>\n<p>However, the 3.4% daily Bitcoin volatility hides a more dangerous price fluctuation. While measuring daily closing prices for traditional markets makes sense, cryptocurrencies trade non-stop. This difference potentially creates much wider movements within the same day, although the daily closing often masquerades it.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/51d97e6f-156c-469e-a62f-ca5bd6d91885.png\"><figcaption style=\"text-align: center;\"><em>Bitcoin price low-high-close USD prices. Source: CoinMarketCap<\/em><\/figcaption><\/figure>\n<p>The average change between the Bitcoin intraday high and low of the past 180 days is 6.5%. As shown above, these &#8216;intraday moves&#8217; surpassed 10% on 25 occasions. Meaning, in reality, BTC price oscillations are much larger than expected for a 3.2% daily volatility asset.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"20x_leverage_seems_crazy_considering_Bitcoins_daily_moves\"><\/span>20x leverage seems crazy considering Bitcoin&#8217;s daily moves<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To put things into perspective, a 5% move in the wrong direction is enough to liquidate any 20x leveraged Bitcoin position. This data is clear evidence that traders should really consider risk and volatility when leverage-trading cryptocurrencies. <\/p>\n<p>Fast profits are nice, but what is more important is being able to survive the usual daily price swings to hold on to those unrealized gains. <\/p>\n<p>Although there&#8217;s not a magical number to set the best leverage for every trader, one must account for the effect of volatility when calculating liquidation risks. Those aiming to keep positions open for more than a couple of days, aiming for 15x or lower leverage, seem to be &#8216;reasonable.&#8217;<\/p>\n<p class=\"post-content__disclaimer\"><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/here-s-how-bitcoin-s-intraday-volatility-complicates-leverage-trading\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Here&#8217;s how Bitcoin&#8217;s intraday volatility complicates leverage trading &#8221; The crypto sector is in a bull market, and frequent evidence comes from anonymous traders who post their five-, six- and seven-figure investment returns as screenshots on Crypto Twitter. This condition creates a FOMO-like situation where everyone gets greedy. The temptation to boost potential earnings&#8230;<\/p>\n","protected":false},"author":1,"featured_media":251211,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvOThlZGYwODMtMGZmZS00OTk2LTg5M2MtYzVhZDBhZWE4MWQ5LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74862,74937,74982,74863,74860,75012,75846,79248,75541,73785],"class_list":["post-251210","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-bitcoin","tag-bitcoin-price","tag-btc-markets","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-derivatives","tag-futures","tag-trading101","tag-volatility","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/251210","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=251210"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/251210\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/251211"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=251210"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=251210"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=251210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}